Apple: You’ve Got to be Kidding

I hope that you all have been following the tiff that has developed between Apple and its app vendors and publishers (see e.g. http://www.informationweek.com/news/personal-tech/smart-phones/showArticle.jhtml?articleID=229200215). Nothing like taking wonderful successes like the iPhone and iPad and then let unbridled greed kill an ecosystem. This is exactly the kind of corporate behavior that has killed so many nascent new markets and deserves to be punished.

As those that have read my previous blogs know, I am a big iPad fan. Among my favorite apps on the iPad are Kindle and Netflix. I was proud of Amazon for sticking up to the publishers to try to get better pricing for their customers, even though they ultimately failed. (Can anyone explain to me why a printed book should be cheaper than an eBook?)

The only logic behind Apple’s decision that ALL content offered through their platform should have to pay them 30% of the gross is that they think they can get away with it. The end result will be one of the following:

1) The content providers will have to charge 30% more on Apple platforms; or

2) There will be less content available on those platforms, because all content will only be available on the iTunes store.

Neither of these alternatives is good strategy for Apple. While exceedingly profitable in the short term, ultimately, it will lead to their ecosystem being stifled of innovation and being surpassed by others that are friendlier to partners and user economics.

I believe that Apple is still thinking like the underdog in its markets and not like the market leader it has become.  Being the market leader brings obligations as well as exceptional rewards.  If Microsoft were to decide to charge a 10% charge for all e-commerce done on Windows, the furor would be loud and never end.  But Apple, with its innovative products seems to believe that it is still the underdog and not the market leader with iPad and iPhone.  It is exactly this sort of bad corporate greed that forces governments to become involved in our industry (see http://online.wsj.com/article/SB10001424052748704657704576150350669475800.html?mod=WSJ_Tech_LEADTop). I hope that Apple senior management and their board wake up soon.

I would urge all iTunes customers to immediately find alternative way to buy content. A good example of this is one of my portfolio companies – Single-Click Checkout (http://www.singleclickcheckout.com/) which is available to merchants on most mobile platforms and allows a user a safe and secure way to purchase things directly from the vendor on their mobile devices without using the platform store.

I hope Amazon and other content owners don’t bow to Apple’s mafia-like tactics. Even if Apple doesn’t realize it, forcing their hand on this and getting them to back down is in everyone’s interest.

I had waited to upgrade my iPhone 3G to an iPhone 4 on Verizon, and was just about to do so.  I no longer intend to go to the iPhone 4 with this Apple policy on content.